[Abebpabeniemo]

Real have declined for the 2nd straight year. This decline greatly affects the ability of American consumers to buy their own production. Combined with an anticipated decline in home equity extraction, consumer spending would also be anticipated to decline. The declining ability to borrow, coupled with declining wages, reduces the money available for consumer spending. Given that consumer spending is 2/3 of economic activity, and 2/3 of our GDP, this portends a slowdown in economic growth as well.

Though nominal wages have increased 3.5% over the last year, when adjusted for inflation they have DECLINED 0.6%. January's real (inflation-adjusted) hourly wage was $8.18/hour (in 1982 dollars). This is a -0.6% change since January 2005's $8.23/hour. Worse still, this is a DECLINE of 1.1% since January 2004's $8.27/hour. This information can be found at the United States Bureau of Labor Statistics at http://data.bls.gov/PDQ/servlet/Surv...=CES0500000049.

Despite Bush Administration spin, American workers are losing ground. They're ability to purchase production through wages is steadily declining. Since consumer spending is 2/3 of all economic activity, this erosion in purchasing power spells trouble for our economy.

Over the last 2 years, consumer spending increases have been sustained through increased borrowing alone. Home equity extraction for 2005 was $243 billion, according to Bloomberg News http://www.bloomberg.com/apps/news?p...d=aE50ss.wrOM0

Home equity extraction would account for 63.3% of our economic growth in 2005. As such, home equity extraction could account for nearly all of the 66.7% (2/3) fraction attributable to consumer spending. Thus it is increased home equity extraction, not wages, that have maintained consumer spending, consumer demand, and GDP growth.

Consumer spending increases are necessary for continued economic growth. According to Bloomberg News, home equity extraction is expected to DECLINE $126 billion from $243 billion down to $117 billion in 2006. This would be a 52% decline, and a 52% decline in consumer spending power. This source of spending is nearly equal to all of our spending growth. With a 52% reduction in consumer spending power, spending would also decline 52%. If 2006 consumer spending remains 2/3 of of economic activity (and GDP), it would reduce our GDP growth by the same 52%. A 52% reduction in this year's 3.2% GDP growth would leave a 2006 GDP growth of only 1.54%.

Considering 2 straight years of declining real wages, there is no reason to think real wages will rise in 2006. As such, wages won't make up for the spending loss from decreased home equity extraction. Less consumer spending will result in less consumer production demand, less demand for workers to provide that production, and declining wages and employment as a result.

It definitely looks like we're in for a year of significantly slower economic "growth." How much slower remains to be seen. With a December Durable Goods Order decline of 10%, the biggest decline in 5 years, the economy is not looking good.


unlawflcombatnt

EconomicPopulistCommentary

Economic Patriot Forum

_________________
The economy needs balance between the "means of production" & "means of consumption."

[alecaf]

Record profits for major companies though. At least CEOs and owners are doing well.

[Vcwdldva]

Record profits for major companies though. At least CEOs and owners are doing well.

My company had a record year in 2005......and then they continued hacking people off their payroll. The sad fact is that even though a corporation is doing good, if your "division" doesn't have a good year, you're painted with an HR Bullseye. Short-sightedness has become the mainstay in American management.....and my company was voted amongst the most admired corporations in America.

[Wvq9InTM]

My company had a record year in 2005......and then they continued hacking people off their payroll. The sad fact is that even though a corporation is doing good, if your "division" doesn't have a good year, you're painted with an HR Bullseye. Short-sightedness has become the mainstay in American management.....and my company was voted amongst the most admired corporations in America.

It's sad when news reports talk about how well the economy is doing and measure it by company earnings rather than how well most are Americans are doing as individuals.

[JulieSmithXIV]

Real wages have shown impressive growth in the last few months. This is not new. Wages never start to go up until the third year of a boom, because that's how long it takes for a labor crunch to begin as employers, confident in the boom, start adding more and more workers.

Don't do anything stupid to kill growth just as workers are finally starting to benefit from it.

[illilmicy]

I was reading an article not long ago about how CEO wages compare to the base wages within a company. In the US, the average CEO was making something like 450 times what the lowest paid worker at the company was. In the rest of the developed world, it was hovering more in the 5 to 15 times rate.

Do CEOs really deserve those kinds of wages?

[cyslespitocop]

Considering that gaining one percentage point of market share in many industries is worth billions of dollars, the successful CEOs are worth every penny.

[Mjxhnapi]

I was reading an article not long ago about how CEO wages compare to the base wages within a company. In the US, the average CEO was making something like 450 times what the lowest paid worker at the company was. In the rest of the developed world, it was hovering more in the 5 to 15 times rate.

Do CEOs really deserve those kinds of wages?

I read something about that too. Seems Japanese automotive execs make about 10% of what their average American counterpart would make as a base salary. Bonuses etc.. were also extremely low in comparison. When I hear about CEOs getting bonuses while their company lays off employees and the company is losing money, I know there is a problem.

@adaher - confident in the boom, start adding more and more workers. have there not been massive lay-offs recently in various industries across the board? And most new manufacturing jobs that are being cut are going overseas?

[Tndfpcin]

Real wages have shown impressive growth in the last few months. This is not new. Wages never start to go up until the third year of a boom, because that's how long it takes for a labor crunch to begin as employers, confident in the boom, start adding more and more workers.

Don't do anything stupid to kill growth just as workers are finally starting to benefit from it.

How can it be a boom at all if wages aren't going up?

[GinaGomesz]

have there not been massive lay-offs recently in various industries across the board? And most new manufacturing jobs that are being cut are going overseas?


There are always layoffs in good times or bad. New stories about layoffs are meaningless, because even the largest layoff stories only account for something like 1% of the total jobs created and destroyed in that month.

Manufacturing employment has been hurting for 20 years. It's going the way of agriculture. In good economies or bad, it's going to be at best flat. Which is not a problem because the jobs of the future are replacing manufacturing jobs.

How can it be a boom at all if wages aren't going up?


A boom is defined loosely as any period where economic growth is high. It's a prerequisite for overall prosperity, but it doesn't guarantee prosperity for the average citizen.

The most important thing to know is that any policies that put a damper on economic growth will cost workers dearly, since they are typically the last ones to benefit from economic growth. The only way to grow wages across the board is to have long periods of good economic growth, long enough to create a tight labor market. In the most recent boom before Bush, from 1994-2000, real wage growth didn't really get going until 1996, the third year of the boom. We're following the same pattern today. The last six months have been excellent.

[gennickO]

There are always layoffs in good times or bad. New stories about layoffs are meaningless, because even the largest layoff stories only account for something like 1% of the total jobs created and destroyed in that month.

Manufacturing employment has been hurting for 20 years. It's going the way of agriculture. In good economies or bad, it's going to be at best flat. Which is not a problem because the jobs of the future are replacing manufacturing jobs.

Not a problem unless that was your job or the jobs of most of the people in your community. In which case it is a serious problem. Especially since those "jobs of the future" are mostly still in the future and usually require training or education and frequently relocation.

A boom is defined loosely as any period where economic growth is high. It's a prerequisite for overall prosperity, but it doesn't guarantee prosperity for the average citizen.

The most important thing to know is that any policies that put a damper on economic growth will cost workers dearly, since they are typically the last ones to benefit from economic growth. The only way to grow wages across the board is to have long periods of good economic growth, long enough to create a tight labor market. In the most recent boom before Bush, from 1994-2000, real wage growth didn't really get going until 1996, the third year of the boom. We're following the same pattern today. The last six months have been excellent. So policies that slow "economic growth" or more accurately, reduce investor return, will cost workers dearly while poliicies which do not slow economic growth will still make no guarantees for anyone but investors?

[italertb]

The real enemy is government.
Public enemy number 1 is your federal government and it does not matter who runs it, they are all "free traitors", and they all do their best to move jobs overseas.
Both parties are massively global, and if you are going to compete with the folks in Bengladesh then you are in for a real bad time.
Democrats are even worse on this than the Republicans, but both parties are guilty as hell here.

[xanonlinexan]

The real enemy is government.
Public enemy number 1 is your federal government and it does not matter who runs it, they are all "free traitors", and they all do their best to move jobs overseas.
Both parties are massively global, and if you are going to compete with the folks in Bengladesh then you are in for a real bad time.
Democrats are even worse on this than the Republicans, but both parties are guilty as hell here.

Oh yes, Gadfly, it has nothing to do with BushCo's economic policies. Nothing to do with trillion dollar deficits. Nothing to do with Bush's corporate welfare schemes. Let's see, Clinton leaves us with a budget surplus, and BushCo squanders it on welfare for big corporations, and tax cuts for the filthy rich, while the rest of us put up with astronomical health care costs, cuts in college tuition loans(even though Mr. Bush wants more scientists), and cuts in services for the poorest of the poor. We're spending billions on a war that had nothing to do with our national security, while Halliburton and company reap record profits, and tax cuts.

Wake up and smell the coffee, it's happening, and unless you are in the billionaire boys club, you're in a race to the bottom. While my mother is trying to figure out the republican prescription drug rip off, BushCo wants to cut medicare. My children and grandchildren will work twice as hard to make less, not because of the democrats, but because of George W. Bush, a businessman who failed at every business he was given.

The problem is not gobernment, it's ineffective, incompetant, secretive, corrupt government.

[zU8KbeIU]

While I agree with you that Bush spending is horrendous, I fail to see how any Bush policy can account for the decline of the wealth of the Middle Class for the past 30 years or the decline in real wages for at least a dozen years.
Now, as long as you are willing to be blind to the stupid policies on the left and as long as the two of us argue who is worse, Republican or Democrats, the politicians are free to screw us in every orifice.
Corporate welfare is horrible but you know, we would not have it if not a lot of the Democrats did not vote for it as well.
Certainly this did not start with Bush nor will it end with Bush.
Your hate Bush rant offers no solutions and does not even target the villains, which happens to be the Federal Government regardless of who is in power.
It did not start with Bush and it won't end with Bush so think about the real villains.

[Podosinovik]

While I agree with you that Bush spending is horrendous, I fail to see how any Bush policy can account for the decline of the wealth of the Middle Class for the past 30 years or the decline in real wages for at least a dozen years.
Now, as long as you are willing to be blind to the stupid policies on the left and as long as the two of us argue who is worse, Republican or Democrats, the politicians are free to screw us in every orifice.
Corporate welfare is horrible but you know, we would not have it if not a lot of the Democrats did not vote for it as well.
Certainly this did not start with Bush nor will it end with Bush.
Your hate Bush rant offers no solutions and does not even target the villains, which happens to be the Federal Government regardless of who is in power.
It did not start with Bush and it won't end with Bush so think about the real villains.

bush is the villain we have right now.

[VastDrura]

While I agree with you that Bush spending is horrendous, I fail to see how any Bush policy can account for the decline of the wealth of the Middle Class for the past 30 years or the decline in real wages for at least a dozen years.
Now, as long as you are willing to be blind to the stupid policies on the left and as long as the two of us argue who is worse, Republican or Democrats, the politicians are free to screw us in every orifice.
Corporate welfare is horrible but you know, we would not have it if not a lot of the Democrats did not vote for it as well.
Certainly this did not start with Bush nor will it end with Bush.
Your hate Bush rant offers no solutions and does not even target the villains, which happens to be the Federal Government regardless of who is in power.
It did not start with Bush and it won't end with Bush so think about the real villains.

Perhaps the real villains are the ones who keep voting one of the 2 "corrupt" parties into power in the first place.

If there is not an alternative, there will be no solution. Even by your own words, you are screwed either way. It would be nice to see the moderates from both parties create a new option for the voters.

[maniaringsq]

bush is the villain we have right now.

Indeed.
You know, Americans hate Congress but love their own Congresscritter.
What does that tell you?
Money is the grease that makes poly ticks work.
As long as Sherman P. Crook takes care of his or her district they get re-elected.
Bush can't spend a dime without Congress.
Democrats and Republicans are equally quilty.
Right now Democrats are whining about the spending, when they are in power it's the Republicans who whine about the spending.
Guess who they are screwing?
Correction:
Bush does carry the largest burden of guilt because the asshole has never vetoed anything, has never spoken out against the spending.
When the Ports deal comes along he threatens with a veto.
Go figure.
No I don't like Bush but I intensely hate Kerry so I voted for Bush.
Twice.
Would do it again if he ran against Kerry, Hillary or Algore.
Everytime.

[vernotixas]

Gee Gadfly, I don't have the time or knowledge to discuss the state of the economy for the last 30 years. The article above is stating the facts of the last 2 years. And I don't have to be an economist to know that Bush was handed a budget surplus on a silver platter. That probably was a good thing? And in case you didn't know Clinton is a democrat.

How is your Grover Norquist neocon drowning of the federal government philosophy working for us since your man took office. Sales of luxury McMansions skyrocketed this year for the investor class. How do you explain that when the wages of the middle class have declined, Hmm. Like I said, it's not the federal government who is the villian, as you describe. It is the elected officials in the government.

I'm sorry that you misconstrue Bush-facts for Bush-hate.

Tune into Lou Dobbs (conservative Republican) for somefacts on how this administration has screwed the middle class.

[Lhtfajba]

Indeed.
You know, Americans hate Congress but love their own Congresscritter.
What does that tell you?
Money is the grease that makes poly ticks work.
As long as Sherman P. Crook takes care of his or her district they get re-elected.
Bush can't spend a dime without Congress.
Democrats and Republicans are equally quilty.
Right now Democrats are whining about the spending, when they are in power it's the Republicans who whine about the spending.
Guess who they are screwing?
Correction:
Bush does carry the largest burden of guilt because the asshole has never vetoed anything, has never spoken out against the spending.
When the Ports deal comes along he threatens with a veto.
Go figure.
No I don't like Bush but I intensely hate Kerry so I voted for Bush.
Twice.
Would do it again if he ran against Kerry, Hillary or Algore.
Everytime.

If intense hate is your only basis for voting then what the hell are you even doing here? If you have no intention of examining politics beyond such a childish level then quit wasting our time.

[sPncEjF7]

Gee Gadfly, I don't have the time or knowledge to discuss the state of the economy for the last 30 years. The article above is stating the facts of the last 2 years. And I don't have to be an economist to know that Bush was handed a budget surplus on a silver platter. That probably was a good thing? And in case you didn't know Clinton is a democrat.

How is your Grover Norquist neocon drowning of the federal government philosophy working for us since your man took office. Sales of luxury McMansions skyrocketed this year for the investor class. How do you explain that when the wages of the middle class have declined, Hmm. Like I said, it's not the federal government who is the villian, as you describe. It is the elected officials in the government.

I'm sorry that you misconstrue Bush-facts for Bush-hate.

Tune into Lou Dobbs (conservative Republican) for somefacts on how this administration has screwed the middle class.

Lou Dobbs had a program about the economy and he was the one that mentioned the 30 years with none of the talking heads disputing him.
My wallet does not dispute the fact either.
However, look you don't seem to pay much attention to news because it was the Republicans who forced Clinton into spending cuts, it was the Republicans who forced wellfare reform on Clinton and it was the Republicans who went along with the massive tax increase on the Middle Class.
So don't tell me about Clinton.
Yes, you hate Bush with a burning passion. It's eating you up.
Do you know how I know this?
From your posts.
OK, I admit it, hate Liberals with a burning passion and it shows in my posts, but I don't live in de nile.

Oh yes Lil, it's the Federal Government.
If you work, look at how much you are forced to pay them.

When, and it's only a question of when and not if, Democrats get back in power the first thing they will do is raise taxes on YOU and ME and everyone else that is working or has a business.
They have promised that every chance they get.
I fail to see how that will raise my income or create jobs here in the states.
I won't hire any Americans fulltime. Costs too much and it's an open invitation for the Feds to interfere in my business.
I get along with a few part time workers and a Mexican firm that handles what I need done.
That is standard practice now and when the minimum wage goes up that will increase.
The more government meddles with business, the harder it gets for the workers and customers who must bear the brunt of it all.
Paying for ever increasing budgets with ever increasing taxes is insane.
At some point we are going to see a massive rebellion against the politicians.
That too is a matter of when and not if.
You liberals only mention increasing taxes, you never mention decreasing government spending. Never.